May 3 -U.S. Congress to Intervene on Behalf of Aggrieved Airline Consumers

Is There Rationale To Justify
Government Action On Passenger Rights?

Business Travel Coalition (BTC) today applauded the scheduling
of hearings in the U.S. House and Senate to examine the plight of U.S.
commercial aviation consumers. Since the major U.S. network airlines massively
consolidated the domestic industry, consumers have faced daily indignities and
financial harm as those airlines have leveraged their new-found market, economic
and political powers to undermine consumers in a variety of ways including
seeking to block sorely needed competition from foreign carriers including Etihad Airways, Emirates Airlines or Qatar Airways (Gulf Carriers).

Much of the airline industry was deregulated, so is
there rationale that would support Congressional intervention? Materials from
the statement of purpose in the Airline Deregulation Act of 1978 (ADA) and from
the U.S. Department of Justice (DOJ) complaint of August 2013 with respect to
the American Airlines-US (AA/US) Airways merger would appear to provide strong rationale
for such intervention.

In subsection (3) of the ADA a purpose was the
availability of “adequate... services by air carriers.” Subsection (7) has as a
goal the avoidance of excessive market domination that could lead carriers to
reduce service. Today’s market domination has greatly accelerated the conversion
from customer-centered to badly customer-disjointed cultures at the three major
U.S. network carriers. It is most certainly clear to Congress that not in a million years would the cultures at the Gulf
Carriers have allowed such atrocious treatment of a guest like Dr. David Dao aboard United Airlines Flight 3411

Excerpts from the ADA (49 USC Section 1301)

"(3) The availability of a variety of adequate,
economic, efficient, and low-price services by air carriers without unjust
discriminations, undue preferences or advantages, or unfair or deceptive
practices, the need to improve relations among, and coordinate transportation
by, air carriers, and the need to encourage fair wages and equitable working
conditions.

"(7) The prevention of unfair, deceptive,
predatory, or anticompetitive practices in air transportation, and the
avoidance of—

"(B) other conditions; that would tend to allow
one or more air carriers unreasonably to increase prices, reduce services, or
exclude competition in air transportation.

With regard to the DOJ complaint, in many ways it was
a vivid critique of how the airline industry had measured up against the
purposes of the ADA. The excerpts below from the DOJ complaint highlight that
in fact the large carriers have reduced service “in tandem” and refer to a
reduction in “amenities."

Excerpts From DOJ Complaint In The Challenge To The
AA/US Merger

p.3

P.3[1]

…Since 1978, the nation has relied on competition
among airlines to promote affordability, innovation, and service and quality
improvements. In recent years, however, the major airlines have, in tandem,
raised fares, imposed new and higher fees, and reduced service. Competition has
diminished and consumers have paid a heavy price.

PP.3–4

3. This merger will leave three very similar legacy
airlines—Delta, United, and the new American—that past experience shows
increasingly prefer tacit coordination over full-throated competition. By
further reducing the number of legacy airlines and aligning the economic
incentives of those that remain, the merger of US Airways and American would
make it easier for the remaining airlines to cooperate, rather than compete, on
price and service.

P.14

35. Increasing consolidation among large airlines has
hurt passengers. The major airlines have copied each other in raising fares,
imposing new fees on travelers, reducing or eliminating service on a number of
city pairs, and downgrading amenities.

[1] All references to page numbers are to the
numbered page of the complaint. The
numbers in front of each passage quoted are the numbered paragraphs of the
complaint.

“Airlines say that if consumers don't like something
they can vote with their wallets. When 11 airlines controlled 80% of domestic
seat capacity that was a plausible argument. Now that it's down to 4 airlines,
many consumers’ votes have been taken away - especially in small and mid-sized
communities,” stated BTC founder Kevin Mitchell. “As most economists agree,
some markets work well, some not so well and some not at all. From a consumer's
point of view, the marketplace for commercial airline services is somewhere
between the latter two as evidenced by the 10 examples of unfair and deceptive
airline practices that BTC recently drew up at http://btcnews.co/1YbkC53,”
added Mitchell.